Jefferies Cuts Dry Bulk Estimates Due to Rate Decline

By Sam Boughedda

Jefferies lowered dry bulk estimates in a note on Monday, saying the move reflects the decline in dry bulk charter rates.

A Jefferies analyst downgraded shares of Diana Shipping (NYSE:), Golden Ocean Group Limited (NASDAQ:) and Safe Bulkers (NYSE:) to Hold. In a note to clients, he explained that the sector has enjoyed “mostly strong earnings” since early 2021 but has come under pressure recently due to softer steel and iron ore demand, “impacted further by lackluster Chinese economic activity.”

“On a positive note, coal shipments are set to remain on a rising trend for several quarters (if not years),” wrote the analyst. “Spot rates have declined from their previous highs, though appear to have found a bottom and look to be seeing some support in the near-term.”

He added that the global steel markets have been under pressure, with Chinese output declining since mid-2021 while steel production excluding China has been declining since early 2022.

“This has resulted in reduced iron ore demand, leaving the Cape segment most affected but also trickling down to the other vessel classes. Cape spot rates averaged a solid $33,000/day in 2021, their highest since 2010, but have earned just $16,000/day so far in 2022.”

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